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Will Taxes Increase? January 11, 2010

Posted by Jeff Nabers in : Hyperinflation, Money, Uncategorized , 1 comment so far

taxes

I was just listening to a recording of a conference call this morning where a financial planner began his presentation with this premise:

Taxes will be increasing in the future

I haven’t listened to the rest of it because I had to pause it and write this post. I’m sure when I go back this guy will paint a whole picture based on the assumption of taxes increasing in the future.

Really?

Maximum Taxes

Well, first, let’s admit to ourselves that there is a very real, hard maximum taxation point. That’s 100%. A taxpayer cannot pay more in taxes than he has. Beyond that is impossible.

Second, let’s admit that there is effectively a maximum taxation point that is well below 100% of what a taxpayer has. Taxes going beyond this point is improbable. Let me explain…

Whether you may realize this or not, you probably pay 60%, 70% or more of every dollar that has ever been “yours” in taxes. Income taxes, property taxes, sin taxes (on booze), gas taxes, sales taxes, excise taxes, franchise taxes, death taxes, etc. Some of these taxes show up on paper that you can see, and some of these taxes are never declared to you at the point at which you pay them.

Where the Line is Drawn

So with the majority of the money that was ever yours already going to these direct taxes, how much more taxation can you take? Imagine a scenario where we go from systematically losing 70% of our money to losing 90% of our money.

Do you think hundreds of thousands (more…)

The End of Small Business Financing with IRA and 401k Funds? (Part 3) October 21, 2009

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , 28comments

mystery

Ok, now it’s time to solve the mystery. (Final Post) [see previous here]

In 1978 Jimmy Carter reorganized the government with this order, and this took the issue of retirement account prohibited transactions away from the domain of the IRS and gave it to the Department of Labor (DOL).

This fact was unknown to (or possibly ignored by) the ROBS promoters who claimed the IRS ROBS letter confirmed the validity of the ROBS strategy. The truth is that the IRS letter did not say whether or not the ROBS strategy creates a prohibited transaction because the IRS didn’t have the authority to say it. It was the authority of DOL. Ah, what fun bureaucracy can be.

Speaking with the Proper Authority

Now, I’ve known about this transfer of authority ever since the creator of the IRA LLC (late attorney Debra Buchanan) told me about it back in 2004. So I’ve been in close contact with DOL employees for several years. Here’s where the bureaucracy gets funny (or scary, depending on how you look at it).

A couple of weeks after the IRS ROBS letter came out, I called my friendly DOL contacts to ask, “What do you (more…)

The End of Small Business Financing with IRA and 401k Funds? (Part 2) October 19, 2009

Posted by Jeff Nabers in : Business Start-Ups, Rollovers As Business Startup, Rollovers As Business Startups, Self Directed IRA Solo 401k, Small Business Lending , add a comment

dc_jefferson_memorial

[This is a continuation of a previous post. You should read that one first so this makes sense.]

The IRS Responds

For the first time ever, the IRS actually addressed the “financing a small business with an IRA or 401(k)” strategy. They called it “ROBS” for “roll over business startup,” and issued a letter on October 1, 2008. This letter basically stated:

Celebrate and Ignore

Most ROBS promoters spun the IRS ROBS letter as a long-awaited government blessing for the strategy. They said that the concerns that the IRS listed were administrative errors, such as (more…)

The End of Small Business Financing with IRA and 401k Funds? (Part 1) October 15, 2009

Posted by Jeff Nabers in : Business Start-Ups, Rollovers As Business Startup, Rollovers As Business Startups, Self Directed IRA Solo 401k, Small Business Lending , 9comments

road_block

Guidant calls it Audeo. Benetrends calls it Rainmaker. SDCooper calls it ERSOP. It goes by many names and it’s gotten a lot of attention from the franchise industry and, as of about a year ago, the IRS. The IRS calls it “ROBS” for Roll-Over Business Startup.

What is it?

It’s a strategy where a person with retirement funds:

  1. Forms a C corporation.
  2. Uses the new C corporation to adopt a 401(k) or profit-sharing plan.
  3. Performs a rollover from existing retirement funds (IRA, 401k, etc) into the new 401(k) plan.
  4. Directs the new 401(k) plan to invest into the new C corporation by purchasing shares of stock.
  5. Now this person has a C corporation with some or all of their retirement funds in it, and they are told they can use the funds to run the corporation, launch a venture, buy a franchise, and even pay themselves a salary.

Special Powers – For Good or Evil?

This is a tremendously (more…)